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OBJECTIVES <br /> There are five main objectives of all investment activities that are prioritized as follows: <br /> 1. Safety <br /> Safety of principal is the foremost objective of the City. Each investment <br /> transaction shall seek to first insure that capital losses are avoided. The <br /> objective will be to mitigate credit risk and interest rate risk. Credit risk shall <br /> be defined as the risk of loss due to failure of the security issuer or backer. <br /> Interest rate risk shall be defined as the risk that the market value of securities <br /> in the portfolio will fall due to changes in general interest rates. <br /> 2. Liquidity <br /> The investment portfolio shall remain sufficiently liquid to meet all operating <br /> requirements that may be reasonably anticipated. This is accomplished by <br /> structuring the portfolio so that securities mature concurrent with cash needs <br /> to meet anticipated demands. It shall be the policy of the City to emphasize <br /> liquidity over yield to meet disbursement requirements. <br /> 3. Diversification <br /> To diversify the investment portfolios by individual financial institution, <br /> government agency, or by corporation in the case of commercial paper to <br /> reduce the exposure to risk or loss. Investment maturity dates should vary in <br /> • order to ensure that the City will have money available when needed. <br /> 4. Yield <br /> The investment portfolio of the City of Forest Lake shall be designed to attain <br /> a market-average rate of return through budgetary and economic cycles, <br /> taking into consideration the city's investment risk constraints, cash flow <br /> characteristics of the portfolio and prudent investment principles. <br /> 5. Responsibility <br /> To maintain public confidence in the City of Forest Lake, all participants in <br /> the investment process shall seek to act responsibly and avoid any transaction <br /> that might impair the credibility of the City. <br /> Subject to requirements of the above objectives, it is the policy of the City of Forest Lake <br /> to offer financial institutions and companies within the City of Forest Lake the <br /> opportunity to bid on investments; however, the City of Forest Lake will seek the best <br /> investment yields. <br /> DELEGATION OF AUTHORITY <br /> Management responsibility for the investment program is hereby delegated from the City <br /> Council to the Finance Director and/or City Administrator, who shall establish <br /> • procedures for the operation of the investment program consistent with this investment <br /> -2 - <br />